AFRICA/ALGERIA - Social peace at risk due to falling oil and gas prices t

Thursday, 21 April 2016 economy  

Algiers (Agenzia Fides) - The sharp decline in oil prices (oil in the first place, plus gas whose cost is related to the first) is likely to have social and political repercussions on those Countries whose main source of income are energy exports. One of these is Algeria, whose economy, recalls a note sent to Agenzia Fides by ISPI (Institute for International Political Studies), is "a kind of mono-culture of hydrocarbon, where the energy industry is worth about 30% of GDP, 95% of exports and 60% of tax revenues".
The note points out that "thanks to the revenue from the sale of energy abroad and the royalties paid by foreign companies, the Algerian government led by President Bouteflika was able to finance a "social pact" with the people and rebuild the Country after the civil war in the 90s. With oil and gas revenues many things were paid: investment in infrastructure and public housing, subsidies regarding the consumption of electricity, fuel, water and food, salaries of civil servants, imports of manufactured goods, etc".
This mechanism, however, is in crisis with the fall in oil prices, which has led to "a sharp contraction in the revenue from hydrocarbon exports, which dropped by about $ 60 billion in 2014 to 35 billion in 2015. Despite a partial increase of the production and gas exports in recent months, the further decrease in oil prices recorded in December and January suggests that revenues in 2016 will be even lower, probably around 30 billion dollars.
Not only are we assisting to the deterioration of the economy, with the consequent reduction of the State's ability to buy social peace, but we also have to deal with the uncertainties at a political level. "Almost 80-year-old President Bouteflika has not appeared in public for several months, and many people wonder if it is not already dead", says the note. "Contrasts are now evident among the inner circle of the President and the economic and military elite in Algeria. The outcome of these skirmishes is not certain.
What is certain is that a failure to increase crude oil prices in the coming years will require drastic political choices", the statement concludes. (L.M.) (Agenzia Fides 21/04/2016)

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